How China's Economic Policies Affect Global Trade

➡️ Tariffs didn’t break global trade; they reshaped it. Trade volumes are holding up, despite initial concerns. And an undeniable surge in South-South commerce signals a fundamental shift away from traditional East-West trade corridors—demanding a fresh look at global supply chains and the evolving balance of power. China’s trade relationship with the Global South is expanding significantly. Chinese exports to developing markets presently surpass those to the U.S. and Europe, backed by strategic infrastructure investments. This dynamic is fueling more than just sales: it’s creating lasting dependencies and reshaping the competitive landscape for European companies, with potential negative credit implications for key manufacturing sectors where EU trade flows have reversed to favor China. The European Union faces the challenge of altering its trade and industrial policies to reflect these changing global trade patterns. The recent Economic Security Doctrine, designed to protect the bloc’s independence from external disruptions, highlights a growing awareness of the need for greater resilience—but the effectiveness of these measures will depend on Europe’s ability to balance openness to trade with safeguarding strategic interests and addressing internal economic challenges. ➡️ In S&P Global Ratings' latest edition of #CreditWeek, our subject matter specialists Izabela Listowska, Paul Watters, and Barbara Castellano explore how the shifting tides of global trade are challenging Europe. Read the full edition below, and subscribe to receive our forward-looking insights on emerging and established credit risks every Thursday.

🌍 China’s Retaliatory Tariffs: A Global Wake-Up Call 🌍 On February 4, 2025, China fired back at the US, announcing new tariffs on coal, LNG, crude oil, agricultural machinery, and more. But it’s not just about trade—it’s about fairness, economic strategy, and global norms. 🚨 China’s actions come after the US imposed additional tariffs on Chinese goods, and it’s clear: this is a strategic response, not just a retaliatory gesture. Here's why it matters: Impact on China: 💥 Economic Pressure: Short-term pain for long-term gain. While tariffs might raise costs, they’re a firm defense against US trade tactics. 🏭 Boosting Domestic Industries: By taxing imports like coal and LNG, China is strengthening its own sectors and creating opportunities for local industries. More jobs. More innovation. 🌏 Diversifying Trade: With the US stepping up protectionism, China’s eyeing new markets—building stronger trade relationships globally. It’s not just about cutting ties with the US; it’s about future-proofing China’s position on the world stage. ⚖️ Legal Pathway: China's challenge at the WTO shows its commitment to maintaining a level playing field in global trade. This is more than a dispute; it’s about setting a precedent for multilateralism in the future. Impact on the US: 💰 Rising Costs for Exporters: Higher tariffs on US goods means reduced competitiveness in the Chinese market. This hits US businesses hard, particularly those reliant on exports like coal, oil, and vehicles. 🔴 Business Uncertainty: US firms like PVH and Illumina now face restrictions on their operations in China. This signals bigger risks for all US-based companies doing business globally. ⚠️ Strained Relations: Trade wars rarely end well. This escalating tension is impacting more than just China and the US—it’s shaking the foundation of global trade relations. My Take: This is a global issue, not just a US-China standoff. The world economy thrives on cooperation, not isolation. Both nations need to rethink their strategies and move toward dialogue, not conflict. The stakes are high—both sides risk undermining the stability that global trade depends on. Call to Action: What’s next for businesses and policymakers around the world? Are we sticking with outdated tactics, or is it time to redefine global trade cooperation? Let’s discuss how we can all move forward toward a better, more collaborative future. Share your thoughts in the comments below! ⬇️

🌍 From globalization to power rivalries: why the global economy is being restructured In my recent presentations to international executive committees, I have insisted on a point that forecasting models failed to capture: the unexpected global power shifts. Unlike innovation, AI, or demographic aging, trends that could be integrated into forecast models, the U.S./China rivalry is reshaping the world economy. This transition generates uncertainty, which is not quantifiable like traditional risk. We are moving from an open global trading system toward a world defined by sovereignty-based economic models. 👉 My analysis highlights three major consequences: 1️⃣ Global power shifts. The U.S. has regained economic momentum through tax cuts, fiscal stimulus, and massive investment in innovation. Structural GDP growth has risen by more than 35% since 2010 and 13% since 2019, outpacing current GDP growth. This reflects stronger productivity, higher wages and more robust consumption. At the same time, China has upgraded its technological capabilities and built an Asian growth pole, notably through Made in China 2025. Economic power is once again a direct source of political power. These dynamics, absent from traditional models, have also triggered rising public and private investment, consumption subsidies, and industrial policies with direct implications for corporate strategies. 2️⃣ The restructuring of trade flows. The “China+1” strategy reduces U.S. reliance on Chinese imports while increasing trade with other Asian countries and Mexico. Europe risks structural decoupling: higher energy costs, lagging investment, and rising imports of Chinese overcapacity in EVs, batteries, and solar panels. Reciprocal tariffs and rules of origin force companies to rethink global supply chains. 3️⃣ The deeper U.S. strategy for 2025. Beyond tariffs, the U.S. seeks to reclaim industrial leadership from China, prioritizing production over short-term consumption. Higher tariffs drive inflation, constrain spending, and alter capital flows. Economic policy uncertainty has quadrupled since 2001, reinforcing unpredictability in global markets. If the U.S. succeeds in reducing its external deficit through rising U.S. household demand for Treasuries, global effective demand could be revised downward. 🎯 What does this mean for global companies? ▶️ U.S. households may no longer be the sole anchor of global demand. ▶️ Asian regionalism will continue to drive structural growth. ▶️ Europe risks stagnant GDP growth and widening inequalities unless it addresses competitiveness gaps. ▶️ Emerging economies will define new models of consumption for their populations and, in doing so, the geography of global demand. My role as an economist is to equip leaders with analytical tools to navigate this changing landscape, where power rivalries rewrite the rules in real time.

A New ‘China Shock’ Is Destroying Jobs Around the World Introduction A new wave of economic disruption, reminiscent of the original China Shock that upended global manufacturing in the early 2000s, is causing job losses worldwide. As U.S. tariffs under the Trump administration divert more Chinese exports away from the American market, countries like Indonesia and Mexico are struggling to absorb the impact of cheaper Chinese goods flooding their economies. Key Details of the Economic Disruption • The Situation in Indonesia: • In Surakarta, a historic textile hub, numerous garment factories have shut down due to competition from low-cost Chinese imports. • Former factory manager Hariyanto, one of 1,500 furloughed workers, is now fighting for back pay and severance as companies collapse under financial strain. • The broader economic fallout extends beyond factory workers, affecting supply chains and local businesses. • Impact Across Other Countries: • Mexico, a key manufacturing hub for U.S. supply chains, is facing increased pressure as Chinese goods are redirected to its markets. • Similar struggles are playing out in other nations reliant on domestic manufacturing, where local industries are being undercut by lower-cost Chinese exports. • Trump’s Tariffs and Their Consequences: • The tariffs aimed at curbing Chinese imports into the U.S. have instead shifted economic pressure onto emerging markets. • Governments in affected nations are now debating policy responses to mitigate the damage while avoiding economic retaliation from China. Why This Matters This renewed China Shock is a stark reminder of how interconnected global trade policies are. While U.S. tariffs were designed to protect American industries, they have instead created ripple effects, devastating jobs in nations with less economic leverage. As more workers face displacement, governments worldwide will need to balance trade protections with policies that prevent entire industries from collapsing under the weight of redirected Chinese exports.

If you really want to understand the future of global trade, stop looking at #Brussels, #Washington, or #Beijing. Start looking at #Lagos. #Nairobi. #AddisAbaba. I recently came across two #maps. The second one isn’t fully up to date, but it made me stop and reflect. Because in just 25 years, the world has changed dramatically—#Africa included. In 2003, #China was the main trading partner for just 18 #African countries—about 35% of the continent. By 2023, that number rose to 52 out of 54. That’s 97% of Africa now trading more with China than with the #UnitedStates. The trade volumes tell the same story: In 2024, total #US.-Africa trade was under $80 billion, while China-Africa trade reached $292 billion—almost four times as much. This isn’t a trend. It’s a paradigm shift. And it didn’t happen by accident. While the #USAi mposed #tariffs, China signed duty-free agreements. While the West debated, China built: infrastructure, access, credibility. And while others disengaged, China remained relentlessly present. In December 2024, China granted duty-free access to exports from the world’s 44 least developed countries—33 of them are in Africa. This is not charity. It’s long-term positioning. Strategic patience. Trade diplomacy. Quiet power. Africa isn’t “rising.” Africa is already the center of global recalibration. Recent U.S. trade policies have further complicated the landscape. In April 2025, the U.S. announced sweeping new tariffs, disproportionately affecting developing nations in Southeast Asia and Africa. Countries like Cambodia, Laos, and Myanmar faced tariffs as high as 49%, while African #nations such as Lesotho and Madagascar were hit with rates up to 50%. These measures, intended to target Chinese manufacturing firms operating in these countries, have inadvertently strained relations with nations that host Chinese investments. South Africa, for instance, has responded by seeking to strengthen trade ties within the continent and with China, aiming to leverage the African Continental Free Trade Area (AfCFTA) to boost economic integration and collective bargaining power. So the real question is: Is the new Cold #War already being fought—silently, but powerfully—for Africa?

China is positioning itself to fill the gaps left by rising trade wars and geopolitical tensions, but its success will depend on several factors. As the U.S. and its allies move toward economic decoupling, reshoring, and trade restrictions, China is working to expand its influence by strengthening ties with emerging markets, advancing self-sufficiency, and challenging Western-led economic structures. One key area where China is making progress is expanding trade and investment in the Global South. Through initiatives like the Belt and Road Initiative (BRI), China is increasing its economic presence in Asia, Africa, and Latin America. As Western nations impose tariffs and sanctions, China is offering infrastructure funding, trade agreements, and investment opportunities, strengthening its position in resource-rich and developing economies looking for alternatives to Western financial systems. At the same time, China is strengthening regional trade agreements. Through deals like the Regional Comprehensive Economic Partnership (RCEP), which covers much of Asia, China is ensuring that its economy remains central to global trade. As Western countries reconfigure their supply chains to exclude China, Beijing is reinforcing its ties within the region, positioning itself as a key player in global trade. To reduce its dependence on Western countries, China is also investing heavily in domestic self-sufficiency, particularly in high-tech industries. With the U.S. imposing export controls on critical technologies like semiconductors and AI, China is ramping up efforts to build its own technological capabilities. While it still lags behind in some areas, such as advanced chips, China’s progress in industries like electric vehicles, renewable energy, and digital payments is rapidly advancing its technological leadership in key sectors for the future. Another significant aspect of China’s strategy is de-dollarization and the development of alternative financial systems. As Western sanctions and financial restrictions push some countries to seek alternatives to the U.S.-dominated global financial system, China is promoting the use of the yuan in international trade and investment. Through initiatives like the BRICS bloc’s push for alternative currencies and China’s experiment with a digital yuan, China is working to reduce reliance on the U.S. dollar. However, there are significant challenges to China’s strategy. Slowing economic growth, demographic challenges, and political uncertainties within China present internal vulnerabilities. Many countries are also cautious about overdependence on China, fearing issues like debt traps and economic coercion. Furthermore, geopolitical tensions with the U.S., Europe, and neighboring Asian nations could limit China’s ability to fully replace Western trade partnerships. While China is filling some of the gaps left by trade wars and geopolitical tensions, it is unlikely to fully replace Western economic dominance.

China's $1 Trillion Trade Surplus: Geopolitical and Economic Implications! China achieved a record-breaking trade surplus exceeding $1 trillion in the first 11 months of 2025, driven by surging exports to the world despite U.S. tariffs, signaling strong manufacturing resilience. This surplus reflects China's robust export-driven growth, as it sells far more goods than it buys, finding new markets in Asia, Africa, and Latin America even as U.S. trade slows.  China exported over $1 trillion in electronic goods around the world in 2024 and has been moving into more complex sectors following the pattern of other industrialized countries. The composition of Chinese exports reveals an upward climb in technological sophistication. Auto exports, particularly electric vehicles, have surged as Chinese manufacturers grab global market share from Japanese and European competitors, with China becoming the world's biggest car exporter. Additionally, semiconductor and shipbuilding sectors demonstrate rapid growth and increasing technological competitiveness. While China's exports to the United States fell by 29% compared to the previous year, its total exports increased by 5.9%, with the largest surge in Chinese exports directed toward the EU, which saw imports increase by 15%. China has simultaneously diversified away from the US market, dramatically expanding presence in Southeast Asia, Africa, and Latin America. China established new production hubs outside of China for low-tariff access and began diversifying its export market away from the US in exchange for closer ties with Southeast Asia and the European Union. This pivoting creates new tensions. China's full-year trade surplus is set to rank as the largest (as a percentage of global GDP) in recent history and will be roughly on a par with the extraordinary surpluses that the United States recorded during the Second World War. The IMF's managing director warned that China is "too big to grow by exports," with China currently representing 17% of global GDP and its current account surplus projected to reach 1% of world GDP by 2029—a level unprecedented for any single country since the 1940s. Moving forward, China's surplus appears structurally entrenched, reflecting competitive manufacturing advantages but also a dependency on external demand that may prove increasingly difficult to sustain amid rising protectionism. Policymakers worldwide face a "clash of mercantilisms" as countries simultaneously pursue trade surpluses. For stability, China's continued willingness to absorb fewer imports while others adjust represents a potential constraint on global growth, even as the surplus demonstrates impressive manufacturing prowess. #Chinatradesurplus #EVs #semiconductors #EUtraderelations #USChinatrade #tradetensions #tariffs #supplychain #technologicalcompetition

The U.S.–China Trade War Escalates: A Conflict Measured in Tariffs and Dependencies This week, the United States significantly escalated its trade confrontation with China, imposing tariffs as high as 145% on key imports—most notably electric vehicles, semiconductors, and clean energy components. The stated goal: to reassert American industrial strength. But behind the rhetoric lies a far more complex and precarious reality. In 2024, the U.S. imported $438.9 billion in goods from China. Over 90% of rare earth materials critical for U.S. defense systems, chip production, and renewable energy originate from Chinese suppliers. Roughly 80% of active pharmaceutical ingredients in American medicine are linked to Chinese production. These are not optional luxuries. They are strategic dependencies. China’s response was measured—but potent. Tariffs on U.S. goods now stand at 84%, coupled with targeted export restrictions on vital minerals such as graphite, gallium, and germanium—materials with few substitutes in the short term. But Beijing’s strategy is not just reactive. It is long-term, systematic, and deeply structural. Over the past decade, China has steadily built dominance in key global supply chains. • It controls over 70% of global lithium refining. • It is responsible for 80–90% of global rare earth processing. • It produces 75% of the world’s solar panels and 60% of electric vehicle batteries. While the U.S. imposes tariffs, China tightens control. Not just over exports, but over the very resources the world needs to function. Beijing did not threaten. It acted—with strategic patience and full awareness of its leverage. The risk is not simply economic. It is structural. The American supply chain—whether in energy, pharmaceuticals, or technology—is tightly intertwined with Chinese production. Raising costs on one end reverberates throughout the entire system. Inflation will rise. Manufacturing timelines will extend. Strategic industries will be disrupted. This is not a trade disagreement. It is a test of resilience. And the numbers suggest the U.S. may be entering this war with more politics than preparation. And China? It is not without vulnerabilities—slowing GDP growth, high youth unemployment, and a property sector in crisis. But it is playing the long game. It’s not trying to win a news cycle. It’s trying to rewrite the structure of global trade—on its terms. And Europe? Caught in the crossfire, unprepared and divided. Europe imports more than 98% of its rare earth elements—the majority from China. And unlike the U.S., the European Union lacks a unified industrial policy or clear contingency plan. Brussels may speak of “strategic autonomy,” but in practice, Europe remains strategically exposed. As Washington and Beijing escalate, Europe is being forced to choose—between two superpowers, between dependency and delay, between values and survival. For now, it watches. But soon, it may have no choice but to act.

🟣 NEW SEMANTIC ANALYSIS: The Silent Slow Revolution - China's New White Paper What does China's recent white paper in response to US trade tariffs, signal? 1️⃣ Weak Signals of Structural Shifts: The analysis identifies subtle yet powerful indicators that the global trade system is transforming permanently. Two years ago, I highlighted how BNP Paribas and HSBC's quiet moves into e-CNY management services were more significant than headline-grabbing pilot programs at the Olympics. Read fresh details in this week`s Semantic Fintech Intelligence Pulse edition. 2️⃣ China's Two-Front Decoupling Strategy: Perhaps most revealing is the distinction between decoupling from US Trade versus US Dollars. The white paper outlines how China is pursuing a nuanced strategy—maintaining selective trade relationships while systematically reducing dollar dependence through the digital yuan infrastructure. According to PBOC data cited by video, the digital yuan has already processed over 1.8 trillion yuan ($250B) in settlements across 200+ countries and regions. This isn't merely a currency play—it's a comprehensive reimagining of financial architecture. As capital allocators, the question isn't if the global financial system is changing, but how quickly institutional frameworks will adapt to this emerging reality. 📍 Read the full analysis here: https://buff.ly/ZIPEGST 👉 Subscribe! Check out our Deep Dives analyzing with the power of Semantic analysis specific Fintechs. We have interrupted our 4-part series on Robinhood as the topic of Tariffs is extremely important. Stay tuned for further analysis on both topics. evAI GrowFin GmbH - Global Tech Influencer Services #DigitalYuan #GlobalFinance #CapitalMarkets #FinancialTrends #China #CBDC #payments #fintech

This week in geopolitical exhaustion: China is not a free market success story. As the U.S., and the world, grapple with how best to meet the challenge of China's rise, too often the commentary suggests the world’s second largest economy is outperforming us on a level playing field. But, as I've pointed out ad nauseam - I can almost see colleague Masha Angelova rolling her eyes - the playing field isn't level. And the reports coming out of China suggest its leadership is doubling down on imbalanced systems benefitting the Chinese state at the expense of the rest of us. China has built the greatest manufacturing and export platform the world has ever seen. Innovation and entrepreneurship have played huge roles. These are significant accomplishments, to be sure, and point to U.S. weaknesses that must be addressed... But also playing a huge role: government subsidies, an undervalued currency, a repressed savings base resulting in cheap capital. Another crucial difference was underscored by Rahm Emanuel on this week’s episode of The Call, brought to you by U.S. Chamber of Commerce Global Intelligence Desk: The Chinese are flooding markets with cheap goods while importing as few manufactured goods as possible. If China were competing by the free trade playbook – based on comparative advantage - it would export the goods it produces efficiently and use the proceeds to buy things it doesn’t make as well.   But instead, as Ambassador Emanuel points out, they’re exporting as much as possible, undermining competitors with below market prices, while striving to limit imports of any manufactured goods, only bringing in raw commodities. The upshot: China is a state-orchestrated system where the Party manipulates production factors - land, labor, energy. It undermines fair global competition, building wealth for the state while leaving ordinary citizens with a small share, making China seem powerful but fundamentally fragile. Yes, the U.S. needs to do better to compete. But as China historian Frank DiKotter has said, the best way to manage Beijing: Contain, and wait. And as Ambassador Emanuel notes, the best way to contain China is in concert with our allies but.... ....allies? Oh wait. Masha, what struck you as tedious this week?